Cryptocurrencies have been around since 2009, and it all started with the creation of Bitcoin. Nearly a decade later, there are now countless digital coins to invest on and the number continues to grow. Investors have become interested in cryptocurrencies and some of them probably have a few coins on their portfolios already. However, it is not an investment option that people should take lightly, and there are a few things to know first about crypto investing.
Understanding is key
Entrepreneur’s Phil Town shares that cryptocurrencies should be treated like stocks. By this, he means that completely understanding everything about a specific coin like Bitcoin or Ethereum is crucial. Before making any major purchases, investors should first look into a coin’s price movement history, its goals and if possible, a list of people who are invested in it. Of course, it is important to understand the concept, pros and cons of investing in cryptos as well.
In doing so, people are able to avoid coins that have little potential and tend to dissipate in a few months or so. There are over 1,900 cryptos out there today, and not many of them are going to be around in the coming months.
Determining a coin’s worth is complex
When the determining the worth of a cryptocurrency, investors should understand that all coins are relatively young. The oldest being Bitcoin which is at least 9 years old. This makes the evaluation process harder as the coins have little history unlike other companies and brands.
Town adds that the evaluation of a coin’s price should instead be likened to diamonds or gold whereas its worth is how much people are willing to pay for it. All investors can do is to check out a coin’s price history and the company that started the coin.
Some cryptocurrencies are created to support blockchain systems and they have more potential than others. For instance, XRP by Ripple is created to make financial transactions worldwide easier. Although the price of XRP is still way behind the likes of Bitcoin, its sustainability is secured by the fact that Ripple is pushing for better banking processes.
Cryptos are better when traded
Investors should also understand that cryptos are volatile. This property makes them a poor choice for a long-term investment. In comparison, Bitcoin’s price in mid-December 2017 was over $19,000. Exactly a month later, its price went down to $11,000. Now, the coin is struggling at the $7,000 level. Its volatility makes it a bad choice for investments, says Town.
Basically, investors looking for long-term investments should avoid cryptos for now. However, traders that rely on volatility can make good use of cryptos. Some traders will buy cryptos one day and then sell them back the next or whenever a gain is made.
Cryptos are still relatively new and there is no telling where they would be years from now. People that want to invest can easily do so by using various platforms available online. However, they should study about the digital coins first as they could end up losing more than they earn if they buy carelessly.
(Featured image by DepositPhotos)
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